How the Internet changed the venture capital landscape: Albert Wenger

Albert Wenger’s venture capital firm, Union Square Ventures, is based in New York City, yet it has funded some notable West Coast companies: it was an early stage investor in social gaming company Zynga and led the first round of funding in Twitter, which is now headed toward an IPO. Overseen by five partners, Union Square, which manages $650-million across four funds, is also an investor in two Canadian companies: Toronto’s Wattpad, a startup focused on online storytelling, and Waterloo, Ont.-based Kik, a smartphone messenger app. On Oct. 23, Mr. Wenger — who holds a PhD in information technology from MIT — will be in Toronto for a fireside interview at OneEleven, the city’s newest startup accelerator. From San Francisco, Mr. Wenger recently discussed a host of topics with Quentin Casey, including the changing venture capital landscape, his advice to entrepreneurs seeking U.S. venture capital, and how the Internet is changing the world. The following is an edited transcript of their conversation.

QWhat shapes investment decisions at Union Square Ventures?

A Our fundamental belief is that the disruption brought on by the Internet is as impactful as our transition from hunter-gathers to farmers. It’s also as impactful as our move from being farmers to having an industrial society. The Internet is global, it’s instant, it’s basically free, and by virtue of mobile devices it’s ubiquitous. It’s fundamentally different from anything we’ve ever had access to.

QUnion Square has put sums ranging from $500,000 to $15-million into Internet investments. What is the fund’s biggest success so far?

A If you look at it purely on financial metrics, we’ve had very big exits. We were early investors in Zynga and we were the first investors in Tumblr. And Twitter is going public. Those are all massive companies worth in the billion-plus dollar range. We invested at comparatively low valuations. Those have been very big exits for us.

QWhen did you start looking at Canadian investments?

A We don’t actually think of the world that way. We don’t think, ‘Oh, we have to make a Canadian investment’ or ‘Oh, we have to make a German investment.’ We look for companies that offer something fundamentally disruptive. Both Kik and Wattpad fit that bill perfectly.

QHave you noticed any differences between American and Canadian entrepreneurs? For instance, I’ve been told Canadian entrepreneurs don’t share the grand visions held by many American entrepreneurs.

A Not the ones we’ve backed. Both Kik and Wattpad have global ambitions. So no, there’s no difference.

Related

A I’m less interested in the regional differences than I am in the fact it’s now possible to build very large, global businesses from anywhere in the world. We’re investors in SoundCloud, which is a global business out of Berlin. We’re also investors in Funding Circle, based in the U.K. The Internet is global. Geography is no longer destiny the way it used to be.

QDoes that change the game for VCs?

A The venture world is changing dramatically because of the Internet. Think about how hard it was for a company in a remote spot to draw any attention to itself in the pre-Internet days. It was much more important that the entrepreneur could make the rounds and walk down the street and say, ‘Here I am, will you fund me?’ That’s changed. It’s the money seeking out the businesses now, much more than it is the businesses seeking out the money.

QI’ve spoken with several Canadian entrepreneurs who say their goal is to get U.S. venture capital because the VCs are better connected and get more involved with the companies they fund. What’s your advice for Canadian entrepreneurs seeking U.S. funding?

A There are some great investors in Canada. I think of Boris Wertz from Version One Ventures, Matt Golden of Golden Venture Partners, and the folks at OMERS Ventures. And I’m sure I’m leaving others out. There are some very good Canadian investors who are indistinguishable from the people I work with in the U.S.

Money will go where the good opportunities are. If you’re building a big business in Toronto, the money will eventually get there. The mistake is thinking you need to relocate your company to raise money. That hardly ever works.

QDo you see any common mistakes made by the entrepreneurs you work with?

A Everybody ends up making their own set of mistakes, which is why this is hard. If there were seven easy steps to follow to entrepreneurial success, everybody would be doing it.

The No. 1 challenge in building a great company is understanding yourself. Most companies reflect the strengths and weaknesses of their founders. Those that are more mindful of their own strengths and weaknesses tend to build more balanced businesses.

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I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.